The governing statutes permit a maximum penalty of $11,000 to $1.1 million for a violation of the securities laws, but the SEC has used the laws to extract extremely large civil monetary penalties from defendants, especially in settled cases.
In 2022, several large broker-dealers agreed to pay a penalty of $125 million each because they failed to keep records of instant messages. In 2010, the SEC obtained a $535 million penalty from Goldman Sachs for a single transaction.
Sky-high penalties in SEC enforcement cases are possible because the maximum statutory penalty amounts are for “each violation” of the securities laws. The method of counting the number of violations is limited only by human ingenuity.
Did a broker-dealer commit one violation when the document retention system did not cover WhatsApp, or did it commit a violation with each of the tens of thousands of instant messages it didn’t retain?
‘Enforcement 40’ for 2020
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